Suppose that on its historical Income Statements, a firm always split its total depreciation and amortization between the Cost of Goods Sold and SG&A. Thus, when we forecast those accounts (namely, CGS and SG&A) we implicitly, and correctly, forecast the firm's depreciation and amortization. Nonetheless, why must we always separately forecast depreciation and amortization as part of our forecasting model? Be brief!

Suppose that on its historical Income Statements, a firm always split its total depreciation and amortization between the Cost of Goods Sold and SG&A. Thus, when we forecast those accounts (namely, CGS and SG&A) we implicitly, and correctly, forecast the firm's depreciation and amortization. Nonetheless, why must we always separately forecast depreciation and amortization as part of our forecasting model? Be brief!

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 12MC: Which of the following does nor assign a value to a business opportunity using time-value...

See similar textbooks

Similar questions

The higher the anticipated return on net operating assets (RNOA) relative to the anticipated growth in net operating assets, the higher will be the unlevered price-to-book ratio. Is this correct? Kindly answer the question with introduction and conclusion based on the concept of the question. Explain the answer properly considering the accounting aspect of it.
The simple model of finacnial planning assumes which of thr following: Only assest are expected to increase the same rate as the sales projection The sales projextion is the inly thing expected to increase Assets liabilities equity and expenses are projected to increase at the same rate as the sales projections
Which of the following statements is/are true? O In the case of flat-rate write-offs on receivables, the sales tax must also be corrected. All deposits are income effective. O If a company's profit is to be reported as high, administrative costs are taken into account when determining the production costs. O Compared to straight-line depreciation, declining-balance depreciation means that profits tend to be higher in the future.
Following IFRS, which statement is false? Group of answer choices If the revaluation initially decreases the long-term operating asset's carrying value, the firm reports the difference between the carrying value and fair value as an unrealized loss on the income statement. If the long-term operating asset's fair value increases in subsequent accounting periods, after an initial write-down, the firm reports the unrealized gain in the revaluation surplus account. The revaluation surplus account is reported as other comprehensive income on the statement of comprehensive income. If the long-term operating asset's fair value increases in subsequent accounting periods, after an initial write-down, the firm reports the unrealized gain on the income statement, but only to the extent of previously recognized losses.
Which of the following does nor assign a value to a business opportunity using time-value measurement tools? A. internal rate of return (IRR) method B. net present value (NPV) C. discounted cash flow model D. payback period method
Comment on the following statements with suitable example: i. The ratio return on assets has net income in the numerator and total assets in the denominator. Explain how each part of the ratio could cause return on assets to fall. ii. Explain how return on assets could decline, given an increase in net profit margin. iii. If quoted market prices are not available, a personal financial statement cannot be prepared. Comment.
How would each of the following scenarios affect a firm's cost of debt, r d (l - t), t=tax rate; its cost of equity, rs; and its WACC? Indicate with an increase (I), a decreease (D), or no change (N) whether the factor would raise, lower, or have an indeterminate effect on the item in question. Assume for each answer that other things are held constant, even though in some instances this would probably not be true. rd (1-t) rs WACC 4) The dividend payout ratio is increased. 5) The firm expands into a risky new area. 6) Investors become more risk-averse. 7) The firm is an electric utility with a large investment innuclear plants. Several states are considering a ban on nuclear power generation.
How would each of the following scenarios affect a firm's cost of debt, r d (l - t), t=tax rate; its cost of equity, rs; and its WACC? Indicate with an increase (I), a decreease (D), or no change (N) whether the factor would raise, lower, or have an indeterminate effect on the item in question. Assume for each answer that other things are held constant, even though in some instances this would probably not be true. 1) The corporate tax rate is lowered. 2) The Federal Reserve tightens credit. 3) The firm uses more debt; that is, it increases its debt ratio
How would each of the following scenarios affect a firm's cost of debt, r d (l - t), t=tax rate; its cost of equity, rs; and its WACC? Indicate with an increase (I), a decreease (D), or no change (N) whether the factor would raise, lower, or have an indeterminate effect on the item in question. Assume for each answer that other things are held constant, even though in some instances this would probably not be true. rd (1-t) rs WACC 1) The corporate tax rate is lowered. 2) The Federal Reserve tightens credit. 3) The firm uses more debt; that is, it increases its debt ratio 4) The dividend payout ratio is increased. 5) The firm expands into a risky new area. 6) Investors become more risk-averse. 7) The firm is an electric utility with a large investment innuclear plants. Several states are considering a ban on nuclear power generation.
How would each of the following scenarios affect a firm's cost of debt, r d (l - t), t=tax rate; its cost of equity, rs; and its WACC? Indicate with an increase (I), a decreease (D), or no change (N) whether the factor would raise, lower, or have an indeterminate effect on the item in question. Assume for each answer that other things are held constant, even though in some instances this would probably not be true. rd (1-t) rs WACC 5) The firm expands into a risky new area. 6) Investors become more risk-averse. 7) The firm is an electric utility with a large investment innuclear plants. Several states are considering a ban on nuclear power generation.
(1) Why do analysts need to consider different factorswhen evaluating a company’s ability to repay shortterm versus long-term debt? (2) Would the currentamount of the owners’ equity be a reasonable price topay for a company? Why or why not?
In a theoretical sense, the financial value of any asset is the present value of: Select one: A. Its past dividends B. Its expected cash flows C. Its expected sales price D. Its operating earnings